102 Economic Analysis for Business Decisions | Savitribai Phule Pune University | MBA

1. In the circular-flow diagram,

a. Spending on goods and services flow from firms to households.

b. Goods and services flow from households to firms.

c. Factors of production flow from firms to households.

d. Income from factors of production flows from firms to households.

2. Scarcity is a condition that exists when

a. There is a fixed supply of resources.

b. There is a large demand for a product.

c. Resources are not able to meet the entire demand for a product.

d. All of the above.

3. Company goals that are concerned with creating employee and customer satisfaction and maintaining a high degree of social responsibility are called ___________ objectives.

a. Social b. Noneconomic c. Welfare d. Public Relations

4. The value of an entrepreneur‟s resources that she uses in production are known as:

a. Explicit costs. b. Sunk costs. c. Operating expenses. d. Technological expenses. e. Implicit costs.

5. One of the most important differences between a firm‟s economic profit and its accounting profit is the subtraction of:

a. Costs incurred when hiring labor, capital, and land.

b. Any explicit cost incurred by the entrepreneur for risk taking.

c. Any implicit charges for the use of capital owned by the entrepreneur.

d. Any taxes on the retained earnings of the firm.

e. The costs of distributing the firm‟s output.

6. Which of the following is true regarding the circular flow model?
a. Households provide the demand for the factor market and business provide the supply for the goods and services market.
b. Households provide the demand for the goods and service market and business provides the supply for the factor market.
c. Households provide the supply for the factor market and business provides the supply for the goods and service market
d. Households provide both the supply and demand for the goods and services market

7. Income and revenues that are created within a country
a. always will remain within that country
b. Can leave that country only when goods are exported.
c. Can leave that country when goods are imported
d. Can leave that country when capital flows into that country's financial institutions.

8. In a circular flow model, the real variables are:
a. Money that flows from the factor market to the households.
b. Only the goods and services that are produced.
c. Only the resources that are used.
d. Both the goods and services produced and the resources that are used.

9. Money is
a. Backed by gold in Fort Knox b. The same as income.
c. The value of all coins and currency in circulation at any time.
d. Anything that is generally accepted as a medium of exchange.

10. The development of money as a medium of exchange has facilitated the expansion of trade because
a. Holding money increases people's income b. No other mediums of exchange are available
c. Money eliminates the "double coincidence of wants" problem
d. Holding money increases people's wealth

11. As the interest rate falls, people hold ________ money instead of bonds because the opportunity cost of holding money has ________.
a. More; fallen b. More; risen c. Less; fallen d. Less; risen

12. Ceteris paribus is the Latin expression for
a. A statement about the way the economic world ought to be.
b. An expression that means "other things being equal."
c. The (false) statement that what is true of the parts is true of the whole or what is true of the whole is true of the parts.
d. The error of reasoning that a first event causes a second event because the first event occurred before the second event.

13. Opportunity cost means
a. The accounting cost minus the marginal benefit. b. The highest-valued alternative forgone.
c. The monetary costs of an activity. d. The accounting cost minus the marginal cost

14. Economics is best defined as the study of how people, businesses, governments, and societies
a. Make choices to cope with scarcity. b. Attain wealth.
c. Choose abundance over scarcity. d. Use their infinite resources.

15. Scarcity requires that people must
a. Trade. b. Compete. c. Cooperate. d. Make choices

16. Microeconomics focuses on all of the following EXCEPT
a. The effect of increasing the money supply on inflation.
b. The purchasing decisions that an individual consumer makes.
c. The effect of an increase in the tax on cigarettes on cigarette sales.
d. The hiring decisions that a business makes.

17. Entrepreneurs do all of the following EXCEPT
a. Bear risk from business decisions.
b. Own all the other resources.
c. Come up with new ideas about what, how, when and where to produce.
d. Organize labor, land, and capital.

18. Principal Agent Problem is related to…….
a. Managers and Owner s b. Suppliers and Buyers
c. Producers and Sellers d. LIC Agents